LML4802
PORTFOLIO EXAM SOLUTIONS
SEMESTER 01 – 2023
1
1.1 Report on Uni Pharma's Conduct
Uni Pharma's actions raise concerns regarding potential violations of provisions under
the Competition Act. The following provisions may have been contravened:
Abuse of Dominant Position: Uni Pharma, with a market share of 40%, approached
other pharmaceutical retailers to collectively increase prices. This conduct could be
seen as exploiting its dominant position in the market to engage in anti-competitive
behavior.
Price Fixing: Uni Pharma's agreement with other retailers to charge the same price for
products indicates a potential price-fixing arrangement. Price fixing is prohibited under
the Competition Act as it restricts competition and harms consumer welfare.
Excessive Pricing: Uni Pharma unilaterally increased the prices of essential products
by 300%. While price increases alone may not always be anti-competitive, an increase
of this magnitude during a pandemic may be considered exploitative and could be
seen as excessive pricing, which is also prohibited under the Competition Act.
Grounds of Justification:
Uni Pharma may argue that the price increase was a response to the increased costs
associated with sourcing and distributing the products during a period of high demand.
However, mere cost increases do not automatically justify a 300% price hike,
especially if it results in hardship for consumers.
Sanctions:
If the Competition Commission finds Uni Pharma guilty of contravening the
Competition Act, the following sanctions may be imposed:
Fines: Uni Pharma could be fined a significant amount based on the severity of the
violation and the company's turnover. The fines could be up to 10% of the company's
annual turnover.
Remedies: The Competition Commission may order Uni Pharma to reduce its prices
to pre-increase levels, discontinue anti-competitive conduct, or take other remedial
actions to restore competition in the market.
Injunctions: The Commission may issue an injunction to prevent Uni Pharma from
engaging in similar conduct in the future.
Reputational Damage: Uni Pharma's reputation may be negatively impacted by public
scrutiny and backlash, leading to a loss of consumer trust and potential harm to its
market position.
, 1.2 Report on Uni and Mega's Supply Agreement
Uni and Mega's supply agreement raises concerns regarding potential contraventions
of the Competition Act. The following issues should be considered:
Price-Fixing and Resale Price Maintenance: Mega instructing Uni to increase prices
by 300% may be seen as a price-fixing agreement. If the agreement further included
a provision that Uni must charge the same price to other retailers, it could also amount
to resale price maintenance, where Uni is coerced into maintaining a specific resale
price.
Abuse of Dominant Position: Mega, with an 80% market share, may be deemed to
have a dominant position. By instructing Uni to increase prices or face a supply cutoff,
Mega could be exploiting its dominant position to engage in anti-competitive behavior.
Defenses Available:
Uni and Mega may argue the following defenses:
Efficiency Gains: They may claim that the price increase was necessary to cover
additional costs incurred due to increased production and distribution demands during
the pandemic. They could argue that this was a reasonable response to ensure
continued supply.
Supply Agreement as a Legitimate Business Decision: Uni may argue that it was
compelled to comply with Mega's instructions to maintain its supply of products. They
may claim that this supply agreement was a legitimate business decision aimed at
securing necessary inventory.
Ultimately, the Competition Commission will need to assess the evidence and
arguments presented by Uni and Mega to determine the validity of their defenses.
1.3 Assessment of the MTN-Telkom Merger
To assess the proposed merger between MTN and Telkom, the following factors and
procedures should be considered:
Type of Merger:
The merger between MTN and Telkom would likely be classified as a horizontal
merger, as both companies operate in the same industry as network operators in
South Africa.
Applicable Procedure:
The specific procedure for the merger review would depend on the market shares and
turnover thresholds of the merging parties. In South Africa, large mergers (above
certain thresholds) require approval from the Competition Commission and may
undergo a detailed investigation.
Factors to Consider:
PORTFOLIO EXAM SOLUTIONS
SEMESTER 01 – 2023
1
1.1 Report on Uni Pharma's Conduct
Uni Pharma's actions raise concerns regarding potential violations of provisions under
the Competition Act. The following provisions may have been contravened:
Abuse of Dominant Position: Uni Pharma, with a market share of 40%, approached
other pharmaceutical retailers to collectively increase prices. This conduct could be
seen as exploiting its dominant position in the market to engage in anti-competitive
behavior.
Price Fixing: Uni Pharma's agreement with other retailers to charge the same price for
products indicates a potential price-fixing arrangement. Price fixing is prohibited under
the Competition Act as it restricts competition and harms consumer welfare.
Excessive Pricing: Uni Pharma unilaterally increased the prices of essential products
by 300%. While price increases alone may not always be anti-competitive, an increase
of this magnitude during a pandemic may be considered exploitative and could be
seen as excessive pricing, which is also prohibited under the Competition Act.
Grounds of Justification:
Uni Pharma may argue that the price increase was a response to the increased costs
associated with sourcing and distributing the products during a period of high demand.
However, mere cost increases do not automatically justify a 300% price hike,
especially if it results in hardship for consumers.
Sanctions:
If the Competition Commission finds Uni Pharma guilty of contravening the
Competition Act, the following sanctions may be imposed:
Fines: Uni Pharma could be fined a significant amount based on the severity of the
violation and the company's turnover. The fines could be up to 10% of the company's
annual turnover.
Remedies: The Competition Commission may order Uni Pharma to reduce its prices
to pre-increase levels, discontinue anti-competitive conduct, or take other remedial
actions to restore competition in the market.
Injunctions: The Commission may issue an injunction to prevent Uni Pharma from
engaging in similar conduct in the future.
Reputational Damage: Uni Pharma's reputation may be negatively impacted by public
scrutiny and backlash, leading to a loss of consumer trust and potential harm to its
market position.
, 1.2 Report on Uni and Mega's Supply Agreement
Uni and Mega's supply agreement raises concerns regarding potential contraventions
of the Competition Act. The following issues should be considered:
Price-Fixing and Resale Price Maintenance: Mega instructing Uni to increase prices
by 300% may be seen as a price-fixing agreement. If the agreement further included
a provision that Uni must charge the same price to other retailers, it could also amount
to resale price maintenance, where Uni is coerced into maintaining a specific resale
price.
Abuse of Dominant Position: Mega, with an 80% market share, may be deemed to
have a dominant position. By instructing Uni to increase prices or face a supply cutoff,
Mega could be exploiting its dominant position to engage in anti-competitive behavior.
Defenses Available:
Uni and Mega may argue the following defenses:
Efficiency Gains: They may claim that the price increase was necessary to cover
additional costs incurred due to increased production and distribution demands during
the pandemic. They could argue that this was a reasonable response to ensure
continued supply.
Supply Agreement as a Legitimate Business Decision: Uni may argue that it was
compelled to comply with Mega's instructions to maintain its supply of products. They
may claim that this supply agreement was a legitimate business decision aimed at
securing necessary inventory.
Ultimately, the Competition Commission will need to assess the evidence and
arguments presented by Uni and Mega to determine the validity of their defenses.
1.3 Assessment of the MTN-Telkom Merger
To assess the proposed merger between MTN and Telkom, the following factors and
procedures should be considered:
Type of Merger:
The merger between MTN and Telkom would likely be classified as a horizontal
merger, as both companies operate in the same industry as network operators in
South Africa.
Applicable Procedure:
The specific procedure for the merger review would depend on the market shares and
turnover thresholds of the merging parties. In South Africa, large mergers (above
certain thresholds) require approval from the Competition Commission and may
undergo a detailed investigation.
Factors to Consider:
